Obama's Contradiction on Health Care: II
By David Henderson
Three commenters on my post last night (ed, mark, and Karl Smith) pointed out, correctly, it turns out, that I missed Obama’s point. I accused him of contradicting himself by claiming that he wouldn’t put any government funds into the “public option” and then saying, just three paragraphs later, that he needed to address how to pay for the plan. I thought he meant the plan that he had just finished talking about. It turns out that he meant the whole plan, including subsidies to people to buy health insurance.
Still, although there’s not as big a contradiction as I had thought, there still is an internal inconsistency. Obama says that the “public insurance option would have to be self-sufficient and rely on the premiums it collects.” OK, so imagine the Obama plan passes with this option. If it’s going to be self-sufficient, it can’t collect any funds from government. That seems to be the general agreement about what “self-sufficient” means. When you start a plan, you need employees and a building. You also need money to advertise. Where do you get it? The usual way in the private sector is that you get loans and or investments from venture capitalists. I’m assuming that everyone agrees that with a government plan, the second option, venture capital, is out. That leaves loans. But even getting loans requires putting out some kind of literature, getting some kind of permission, etc. So you probably need lawyers and a few other people. How do you pay them? You might say, “With loans,” but you don’t have loans yet and you can’t get them without the lawyers. Will the lawyers just provide their services gratis? See the problem? Right from the getgo, the government would have to put in some money, thus breaking Obama’s promise.
Now, you might argue that getting that first loan would require that the federal government subsidize the plan for only a few million dollars. But there’s a bigger problem. Let’s say that the plan gets set up but that the premiums required to get insurance are so high, given its low deductibles and co-payments, that very few people want it. So let’s say at the end of the first year, it has only a few hundred thousand beneficiaries and looks as if it will lose money. That makes loans harder to get. What happens next? Does anyone really doubt that the government would come in with subsidies, massive ones if necessary?
Now, I’m not going to say that I’m shocked that a politician would break his promise. After all, one of Obama’s apparently most deeply held views about health care reform, which helped him beat Hillary Clinton in the primaries, was that requiring people to buy health insurance was a bad idea. Yet that’s what he now advocates. It takes more gall, though, to propose something that a little thought shows to be impossible.